Final Exam For MBA Managerial Economics
USTC 11th,Jan,2014
Student ID_______________ Name in Chinese____________
Part I Multiple Choice
1. Economic theory is a valuable tool for business decision making because it A) identifies for managers the essential information for making a decision. B) assumes away the problem. C) creates a realistic, complex model of the business firm. D provides an easy solution to complex business problems.
2. Economic profit is
A) the difference between total revenue and the opportunity cost of all of the resources used inproduction.
B) the difference between total revenue and the implicit costs of using owner-supplied resources.
C) the difference between accounting profit and the opportunity cost of the market-supplied resources used by the firm.
D) the difference between accounting profit and explicit costs.
3. St. Charles Hospital, located in an upper-income neighborhood of a large city, recently received a restored mansion as a gift from an appreciative patient. The board of directors decided to remodel the mansion and use it as recuperative quarters for patients willing to pay a premium for luxurious accommodations. The cost to the hospital of using the mansion includes
A) nothing because it was a gift.
B) how much the hospital pays for upkeep--taxes, insurance, utilities, maintenance, etc. C) how much the hospital would receive if it rented or sold the mansion. D) both b and c
4. The principal-agent problem arises when
A) the principal and the agent have different objectives.
B) the principal cannot enforce the contract with the agent or finds it too costly to monitor the agent.
C) the principal cannot decide whether the firm should seek to maximize the expected future profits of the firm or maximize the price for which the firm can be sold.
D) both a and b E) both a and c
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5. In a perfectly competitive market
A) all firms produce and sell a standardized or undifferentiated product.
B) the output sold by a particular firm may be quite different from the output sold by the other firms in the market.
C) firms are price-setters.
D) it is difficult for new firms to enter the market due to barriers to entry.
Use the following general linear demand relation to answer questions 6 through 8.
Qd = 500 – 3P + 0.006M – 4PR where M is income andPRis the price of a related good, R.
6. From this relation it is apparent that the good is:
A) an inferior good
B) a substitute for good R C) a normal good
D) a complement for good R E) both c and d
7. If M = $15,000 and PR = $20, the demand function is
A) P = 510 – 3Qd B) Qd = 510 – 3P C) Qd = 500 – 3P D) P = 500 – 3Qd E) Qd = 600– 3P
8. If M = $15,000 and PR = $20 and the supply function isQs303P, equilibrium price and
quantity are, respectively,
A) P = $80 and Q = 270. B) P = $66 and Q = 380. C) P = $80 and Q = 280. D) P = $90 and Q = 270. E) P = $80 and Q = 240.
9. If the current price of a good is $10, market demand isQd40020P, and market supply is
Q5010P, then sA) more of the good is being produced than people want to buy. B) a lower price will increase the shortage.
C) at the current price there is excess demand, or a shortage, of 150 units. D) Both b and c
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E) All of the above
10. Consumer surplus
A) is positive for all but the last unit purchased.
B) for a particular unit of consumption is computed by taking the difference between demand price and market price.
C) for all units consumed is the area below demand and above market price over all the units consumed.
D) added to producer surplus provides a measure of the net gain to society from the production and consumption of the good.
E) all of the above
11. A firm will maximize profit by producing that level of output at which
A) the additional revenue from the last unit sold exceeds the additional cost of the last unit by the largest amount.
B) the additional revenue from the last unit sold equals the additional cost of the last unit. C) total revenue equals total cost. D) both b and c
12. The function a decision maker seeks to maximize or minimize is the ________ function.
A) optimal
B) decision-making C) objective D) marginal
E) none of the above
13. When marginal cost is greater than marginal benefit at the current activity level, the decision maker can increase net benefit by decreasing the activity because
A) total benefit will rise by more than total cost will rise.
B) marginal cost is rising faster than marginal benefit is falling. C) net benefit is upward sloping at this point.
D) total cost will fall by more than total benefit will fall.
14. In a linear regression equation of the form Y = a + bX, the slope parameter b shows… A) ΔY / Δb. B) ΔX / Δb. C) ΔY / ΔX. D) ΔX / ΔY. E) none of the above
15. The sample regression line
A) shows the actual (or true) relation between the dependent and independent variables. B) is used to estimate the population regression line. C) connects the data points in a sample.
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D) is estimated by the population regression line. E) both b and c
16. A typical indifference curve… A) shows that as a consumer has more of a good he or she is less willing to exchange it for one unit of another good. B) shows all combinations of goods that give a consumer the same level of utility. C) shifts out if income increases. D) both b and c E) all of the above
17. Along an indifference curve A) the ratio of the marginal utilities is constant. B) the MRS is constant. C) the price ratio is constant. D) both b and c E) none of the above
18. Marginal utility is the… A) relative value of two goods when a utility-maximizing decision has been made. B) change in total utility that results from increasing the amount of a good consumed by one unit. C) change in the amount of a good consumed that increases total utility by one unit. D) utility obtained from the consumption of all but the last unit of a good. E) none of the above
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The next 4 questions refer to the following graph: The price of X is $30 and the price of Y is $60.
Y 30 Units of good Y14 A B U2U1 024 40 X Units of good X
19. If U1 is the highest level of utility the consumer can achieve, what is the consumer's income?
A) $ 480 B) $ 600 C) $ 800 D) $1,200
E) none of the above
20. How many units of X will the consumer choose if point B is the utility-maximizing choice?
A) 28 B) 30 C) 32 D) 60
E) none of above
21. At point B,
A) if the consumer obtains one more unit of Y, ½ unit of X must be foregone in order to keep utility unchanged.
B) if the consumer obtains one more unit of X, two units of Y must be foregone in order to keep utility unchanged.
C) the marginal rate of substitution is ½. D) both a and c E) all of the above
22. If income is $1800, how many units of Y will the consumer choose?
A) 24 B) 8 C) 32 D) 20
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E) 14
23. Which of the following will NOT affect the elasticity of demand for a product?
A) the number of substitutes
B) how long consumers have to adapt to price changes C) the cost of producing the product
D) the percentage of the consumer’s budget spent on the product E) all of the above will affect the elasticity of demand for a product
24. If the price elasticity of demand for a good is 0.8 and quantity demanded decreases by 40%, price must have
A) increased by 50%. B) increased by 32%. C) decreased by 20%. D) decreased by 32%. E) none of the above
The next 4 questions refer to the following figure:
25. The price for which 300 units can be sold is $_____.
A) 6 B) 8 C) 10 D) 16 E) 18
26. The price at which total revenue is maximized is $_____.
A) 10 B) 12 C) 15 D) 8 E) 6
27. The marginal revenue of the 100th unit is $_____ and demand is __________ at this point.
A) 15；inelastic B) 10；elastic C) 12；elastic D) 15；elastic
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E) 12；inelastic
28. What is demand elasticity over the price range $10 to $15?
A) 2.00 B) 1.00 C) 0.50 D) 0.95 E) 0.71
29. Demand equations derived from actual market data are
A) generally estimated using regression analysis B) never estimated using consumer interviews. C) empirical demand functions. D) both a and c E) both a and b
30. For a linear demand function, Q = a + bP + cM + dPR, the cross-price elasticity is…
A) d
B) d(Q/PR) C) d(PR/Q) D) -d
E) -d(Q/P)
31 A short-run production function assumes that
A) the level of output is fixed.
B) at least one input is a fixed input. C) all inputs are fixed inputs. D) both a and b E) both b and c
32. If average product is increasing, then marginal product
A) must be greater than average product. B) must be less than average product. C) must be increasing. D) cannot be decreasing. E) both a and c
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The next 2 questions refer to the following:
The amount of total output produced from various combinations of labor and capital.
Units of Capital 1 2 3 4
Units of Labor
1 2 3 4 5
20 38 53 63 68
36 68 94 112 120
48 88 122 148 164
53 94 133 164 184
33. If capital is fixed at three units, how much does the fourth unit of labor add to total output?
A) 16 B) 28 C) 34 D) 36
E) none of the above
34. If the amount of labor used increases from three to four units, the marginal product of the second unit of capital A) increases by 8 units. B) increases by 49 units. C) decreases by 14 units. D) decreases by 49 units. E) none of the above
The next 3 questions refer to the following:
The graph on the left shows the shortrun cost curves for a firm in a perfectly competitive market, and the graph on the right shows the current market conditions in this industry.
35. In order to maximize profit, how much output should the firm produce?
A) 20 units
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B) 40 units C) 50 units D) 60 units E) 80 units
36. What is the maximum amount of profit the firm can earn?
A) $ 50 B) $ 40 C) $ 80 D) $150
37. What do you expect to happen in the long-run?
A) Market supply will decrease. B) Market price will decrease. C) The firm's profit will decrease. D) both b and c E) all of the above
38. For a price-taking firm, marginal revenue A) decreases as the firm produces more output. B) is the addition to total revenue from producing one more unit of output. C) is equal to price at any level of output. D) both b and c E) both a and c
39. In order to minimize losses in the short run, a perfectly competitive firm should shut down if… A) total revenue is less than total cost. B) total revenue is less than total fixed cost. C) total revenue is less than the difference between total fixed cost and total variable cost. D) total revenue is less than total variable cost.
40. A monopolist A) can earn a greater than normal rate of return in the long run. B) can raise its price without losing any sales because it is the only supplier in the market. C) always charges a price that is higher than marginal revenue. D) both a and c E) both b and c
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Part II
Please read the following two excerpts and write up your insights into them. Support your position with principles and basic concepts you learned from this course and from your reading, studies, experience, or observations.
1. The Pope and the price of Fish
For over one thousand years, the Catholic Church required its members to abstain from meat on Friday in the spirit of penance. This obligatory abstinence from meat has helped maintain the sagging U.S. commercial fishing industry. However, Pope Paul VI in February of 1966 issued an apostolic decree，“Poenitemini，”relaxing the rules on fasting and abstinence during Lent. As parts of the decree，the Pope delegated power to national conference of local Bishops to decide Whether to continue the rule of Friday abstinence. Having this authority, the Catholic Bishops of the U.S. terminated obligatory meatless Fridays, except during Lent. Starting in December 1966,Catholic were no longer bound to abstain from meat eating on non-Lent Friday（i.e.，approximately 46 Fridays during the year）
The actions of Pope Paul VI and U.S. Bishops have come in the wake of government efforts to arrest the decline in commercial fishing through the 1964 Fishing Fleet Improvement Act(1,pp.141-62). On a broader scale, the reaction of the world’s 584 million Roman Catholics may seriously damage commercial fishing in many counties. The purpose of this article is to assess the short-run economic impact of the Papal-Bishop decree. For New England，the test area, it will be demonstrated that during the nine-month period following the P-B decree the demand curve for fish has shifted downward resulting in a 12.5% fall in landing prices.
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2. Toll-free holiday for the good of people
Amid growing calls, the State Council or China’s cabinet, issued a toll-free road policy in August, allowing passenger cars with seven seats or less to travel for free on toll roads during four major holidays. The first toll-free holiday will be the upcoming eight-day Mid-Autumn Festival and National Day holiday. The removal of toll fees will not only make travel cheaper and more convenient, but will also boost the service industry, as people will spend more and more money on related services, such as food and accommodation.
Hu Fangjun, an expert from the China Academy of Transportation Sciences, said companies funded by the toll fees will close about 20 billion yuan each year throughout four extended holidays due to the waiving of fees.
However new revenues derived from hefty spending during the longest holiday season will likely compensate for the losses. The companies that run the toll booths are largely state-owned, while the sector has been named as one of the most profitable in China.
Expensive tolls fees also drive up logistics costs, which can affect the prices of a wide range of commodities, forcing consumers to foot the bill in the end.
Roads are public infrastructure. Every citizen has the right to be on the road. The waiving of tool fees during holidays will give the roads back to the public.
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Answer Sheet
Part I Multiple Choice
Write your answers into the corresponding blank 1 A 6 E 11 B 16 B 2 A 7 B 12 C 17 E
3 D 8 A 13 D 18 B 4 D 9 D 14 C 19 D CECAB ACBDC BAEAC ADDDD
5 A 10 E 15 B 20 C
21 C 26 A 31 B 36 A 22 E 27 C 32 A 37 D 23 C 28 B 33 E 38 D 24 A 29 D 34 A 39 D 25 B 30 C 35 C 40 D
AADDA EBADE BCDCB BEBDC
Part II 1.
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2.
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